Guatemalans to Vote in Run-Off Election Amid Mounting Violence

Nov. 6 (Bloomberg) -- Guatemalans vote in presidential
elections today as mounting violence raises the popularity of a
former general who has promised to clamp down on drug gangs with
an “iron fist.”

Polls show Otto Perez Molina leading Congressman Manuel
Baldizon by about 10 percentage points ahead of the runoff
election, with more than 80 percent supporting a hard-line
stance on crime. Perez won the first round on Sept. 11 with 36
percent of the vote, while Baldizon had 23 percent. Voting
starts at 7 a.m. local time and ends at 7 p.m.

Mexico’s drug-fueled violence is flooding south with two of
its most deadly gangs, the Zetas and Sinaloa, now holding sway
over entire jungle townships in Guatemala, according to U.S.
officials. While Perez’s pledge to step up the role of the army
has garnered support, his “iron fist” policy may escalate
violence just 15 years after the end of military rule and a
civil war that left 200,000 dead.

“This is a strategy born of desperation” and may
backfire, said Eric Farnsworth, vice president of the Council of
the Americas in Washington, who was part the U.S. delegation
that worked with Perez to reduce the size of the armed forces
after the 1996 peace accords. “It’s a mark of utter failure by
Guatemala’s institutions that people are seriously talking about
bringing the military back.”

Perez, who heads the ticket for the Patriot Party, was
backed by 55.1 percent of those surveyed Oct. 8-17 by Guatemala
City-based Borge y Asociados, compared with 44.9 percent for
Baldizon. Almost 82 percent said they support Perez’s “mano
dura,” or iron fist, approach to crime, according to the survey
of 2,016 people. The poll didn’t give a margin of error.

Economic Impact

Foreign direct investment into the country of 14.4 million
will stagnate this year at about $668 million, after rising 22
percent in 2010, according to the International Monetary Fund.
The economy, Central America’s biggest, will expand 2.8 percent
in 2011, the second slowest pace in the region after El
Salvador, the institute said in an Oct. 5 report.

Companies say that security accounts for 13 percent of
their costs, according to an April survey by the Association for
Research and Social Studies, based in Guatemala City. Goldcorp
Inc., the world’s second-largest gold producer by market value,
runs the Marlin mine in western Guatemala, while Perenco SA, a
closely held French oil company, owns oil concessions in the
northern state of Peten.

Yields on the country’s 30-year bonds have risen 33 basis
points, or 0.33 percentage point, to 6.39 percent this year,
according to data compiled by Bloomberg. Guatemala’s currency,
the quetzal, has weakened 2.4 percent to 7.83 a dollar.

Civil War

“Throwing the army into this is dangerous,” said Steven
Dudley of InSight Crime, a Washington-based security research
group, citing a history of human rights abuses and a lack of
training.

During the 36-year civil war, the military destroyed areas
being used by Marxist and Mayan guerillas. In its 1999 findings,
a United Nations-sponsored truth commission said that witness
accounts showed the government conducted genocide.

Perez, 61, who headed military intelligence during the
latter stages of the civil war, vows to create special units
including soldiers to combat drug cartels.

“Many have the view that it’s the military that is going
to restore law and order,” said Adriana Beltran, an analyst at
the Washington Office on Latin America. “But what does the iron
fist mean? Is he going to strengthen the police under a
democratic vision or as part of a military doctrine?”

Respect the Law

Perez told the online publication Plaza Publica in July
that the army has experience battling drug traffickers and is
better at weeding out corruption in its ranks than the police.

The iron fist policy “does not set out to kill the
criminal,” he told the Guatemala City-based publication. “It’s
to respect and enforce the law.”

Requests for an interview Perez through his spokeswoman,
Clariza Castellanos, were unsuccessful.

Bringing in the army hasn’t proved a solution to Mexico’s
violence, where as many as 40,000 people have been killed since
President Felipe Calderon declared war on the cartels in 2007.

Now Mexican gangs including the Zetas, Sinaloa and Gulf
cartels are battling for drug routes in northern Guatemala, said
InSight Crime’s Dudley. The government blamed the Zetas for the
killing of 27 ranch workers in May.

‘Ideal Haven’

Guatemala’s location and weak law enforcement make it an
“ideal haven” for drug traffickers moving cocaine from South
America to the U.S., according to a State Department report in
March, which said cartels now control entire towns.

The country already has a murder rate of 46 per 100,000
inhabitants, almost four times higher than Mexico, according to
the World Bank.

“Given the shadows that haunt Perez’s past, his promise to
govern with an iron fist does not bode well for Guatemala,”
said Daniel Wilkinson, deputy director for the Americas division
of New York-based Human Rights Watch and author of “Silence on
the Mountain,” an account of Guatemala’s civil war.